World rolling out emergency financial moves

NEW YORK (MarketWatch) -- Nations across the globe moved on new emergency measures Sunday to recapitalize banks, guarantee bank deposits and stabilize the world banking system amid fear of a global financial meltdown, reports said.

France, Germany, the U.K., Australia, the United Arab Emirates and Portugal were among the countries reported readying of fresh efforts to protect depositors and their banks.

The French government plans to propose a law Monday that would offer a state guarantee for banks and create an agency to help channel capital into them, Agence-France Presse quoted a ruling party deputy as saying Sunday.

Gilles Carrez, a senior member of the parliamentary finance committee, told AFP that the law would be unveiled at an emergency Cabinet meeting called by President Nicolas Sarkozy in response to the economic meltdown.

"We need a law to put in place a state guarantee and an organ that will be charged with raising funds to help banks deal with their need to recapitalize," Carrez said.

AFP said Sarkozy's office had confirmed the Cabinet meeting, with Sarkozy due to address the French nation in a televised speech Monday following the meeting.

A second ruling party parliamentary source said that the law would be brought to a parliamentary vote "sometime during the week," AFP reported.

Germany & Britain

The U.K. government is finalizing plans to invest billions of pounds in four of its largest banks as part of its efforts to stabilize the country's financial system, a move that could lead to the suspension of London stock trading Monday, according to media reports.

The government could take a majority stake in Royal Bank of Scotland Group
RBS, +0.00%
and HBOS PLC (HBOS), London newspapers reported. See full story.

Similarly, Germany's government will set up a fund to provide as much as 100 billion euros ($135 billion) of equity capital to help the nation's banks through the economic turmoil, Reuters reported Sunday, citing the daily Handelsblatt. See full story.

Australia & New Zealand

Meanwhile, Australian Prime Minister Kevin Rudd said Sunday that his government will guarantee all deposits with institutions for the next three years to bolster confidence in the banking system.

The government will also guarantee all "term wholesale funding" by Australian banks operating in international credit markets to ensure they can compete against global rivals getting similar backing, Bloomberg News quoted Rudd as saying.

In addition, Australia said it was doubling its pledge to purchase residential mortgage-backed securities to A$8 billion.

For its part, New Zealand said it would guarantee all retail bank deposits for the next two years to free up liquidity flows, the Associated Press quoted Finance Minister Michael Cullen as saying Sunday.

UAE, others

Even oil-rich Gulf nations were not immune from the need to protect their banks.

The United Arab Emirates said Sunday it will guarantee all credit risks and deposits at national banks and interbank lending among all banks operating in the UAE, the Financial Times reported.

The Abu Dhabi-based central bank also promised to inject extra liquidity if needed, as local banks are being frozen out of international debt markets and liquidity in local money markets is becoming increasingly scarce, the report said.

But the latest measure, coupled with interest rate cuts announced last week, failed to lift investor sentiment and stock indexes in the UAE, as well as the rest of the region, slumped sharply, the report said.

The Dubai Financial Market Index fell 5.4% to 3,025.08 points, slightly recovering from early losses that sent the index below the 3,000 mark, the Financial Times said, adding that the index has tumbled 26.7% since last week.

The UAE move came as neighboring Saudi Arabia's central bank made 150 billion Saudi riyals ($40 billion) available for its banks Sunday, according to local media reports.

Back in Europe, Portugal's finance minister announced that his government was offering a 20 billion euro state guarantee for banks endangered by the global financial crisis, AFP said.

Also Sunday, Norway said it plans to issue government bonds amounting to 350 billion kroner ($56 billion) in order provide collateral that may be used in banks' funding operations. It said lender Norges Bank will at the same time provide two-year liquidity loans targeted at smaller banks.

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